Factors to Consider When Deciding Who Gets a Pay Rise

One of the most challenging times of the year for any Manager is deciding to whom you will be offering a pay rise. As much as we would like to give everyone an equal boost when it comes time to do salary reviews, budget limitations inevitably result in tough decisions needing to be made.

The cost of living crisis is not news to business leaders and individuals and every employee will be mindful of the fact that the ONS’s latest wage statistics show that wage growth has fallen for both total pay and regular pay. People are finding it difficult to cover the basic cost of living, let alone any extras on top, so if your business is offering annual wage rises you will already be offering something lucrative.

The question is: who gets one?

As difficult as it can be to make this decision, there are several factors involved that can help you to do it.

Assess Individual Performance

The most obvious place to begin is by assessing your employees’ performance. Pay rises are inherently tied to job performance, so rewarding those who have performed the best makes sense.

However, as a team leader, it is important to be mindful of any biases that could impact your decision. Although you might think you are being impartial, it is always possible to be unconsciously influenced by team dynamics or personal relationships.

The best way to eliminate these biases is to assess each employee against their job description and in relation to their most recent performance reviews.

Your company might use additional metrics or hard targets to measure job performance but these are only useful for comparing two employees with the same title, and often makes it more challenging to gauge performance differences between roles or departments. Instead, assess each employee individually against their job description and responsibilities to get a clearer picture of how they perform.

Understand The Market Rate

Of course, deciding who gets a pay rise comes down to more than just performance; managing a team involves responding to external forces and those within the business. Understanding the market rate for each of your team members is another factor to consider when you’re making your decision, and it can have a major impact on the outcome.

The reality is that for many employees compensation is one of the most important aspects of job satisfaction, and if their salary isn’t in line with the market rate they may consider looking for another job. As a Manager, you must understand and match the market rate for each of your employees to prevent them being at risk from leaving for another employer.

Sometimes, this will mean having to give a pay rise to someone who is underperforming to keep them within the business. Remember, it is always more expensive to find a new employee than it is to retain one – knowing how each of your team is compensated relative to their market rate will give you clarity when it comes to making decisions like these.

Evaluate Each Employee’s Skills

As well as the financial cost of losing an employee, you should think about the cost to your organisation of losing valuable skills and knowledge. Every employee, even those with the same job title, brings their own unique set of skills and qualifications to the role that needs to be considered when considering a pay rise.

It might be that two Engineers are identical in their day-to-day performance of a role but one has better CAD skills. Could your business withstand the loss of these skills if the employee decided to leave in search of a higher salary? If not, then you may have to offer the pay rise to the employee with more valuable skills.

This line of thought can also be applied to soft skills and other intangibles such as employee relationships, connections, and organisational knowledge. Almost every business will have employees whose job performance is outweighed by who or what they know, and these factors can have a sizeable impact on the future of your business. Knowing their value is thus essential for choosing who gets a pay rise.

Time Served in Your Company

Another factor to consider when choosing who gets a pay rise is how long each employee has been with the company. It’s no secret that loyalty is valued in every industry and level of a business. Long service is rewarded precisely because it prevents the loss of the skills and knowledge mentioned above.

If you have two identical employees, it can seem unfair to give one of them a pay rise just because they have been there longer – after all, people can’t control when they join a business or who joined before them.

However, rewarding long-serving employees is an incentive for other employees to stay with the business so that they can enjoy the same benefits, while also showing your appreciation to those that have stuck with you. Prioritising seniority and time spent with the company can be an effective way to determine who gets a pay rise while preventing the loss of your most important team members.

Consider Non-Financial Benefits

At the end of the day, there is never going to be enough money to give everyone the pay rise you want or that they feel they deserve. Budgets are strict and often unchanging but one tool that is available to you as a manager is being able to offer non-financial benefits.

What this looks like will depend on your organisation and resources but non-financial benefits are becoming increasingly valued by employees. In place of a pay rise, you might offer an employee additional annual leave or the ability to work remotely instead of coming into the office.

Whatever you decide on, additional benefits like these can go a long way to making an employee feel valued even when you aren’t able to offer them a pay rise and can do a lot to dispel any resentment that might arise if they don’t receive one.

Summary

There are no easy ways to decide who does and doesn’t get a pay rise. However, there are ways to make the choice easier, but they involve going beyond simple metrics or measures of performance and looking at an employee’s holistic value to the business.

Assessing employee performance, skills, their value in the wider job market, and how long they have been with your business are all ways to gain better insight into who should receive a pay rise. Inevitably though, there will be those who will miss out, but for these employees, it is well worth considering non-financial benefits as a means of compensation.

Just hanging on to your team members is challenging enough, so when it comes time to grow your business and bring on more employees, why not trust a professional? CV Consulting is a leading UK recruitment agency specialising in engineering recruitment.

As experts in engineering, we can help connect you with the leading talent in the industry and offer insight into current engineering industry benefits so that you can present the most compelling offer to candidates. If you’re curious about how we can help your business, get in touch with one of our team members today.